Bitcoin: A viable currency?

U-T EconoMeter panelists consider this cybercash alternative

In this April 3, 2013 photo, Mike Caldwell, a 35-year-old software engineer, holds a 25 Bitcoin token at his shop in Sandy, Utah. Caldwell mints physical versions of bitcoins, cranking out homemade tokens with codes protected by tamper-proof holographic seals, a retro-futuristic kind of prepaid cash. With up to 70,000 transactions each day over the past month, bitcoins have been propelled from the world of Internet oddities to the cusp of mainstream use, a remarkable breakthrough for a currency
— AP

In this April 3, 2013 photo, Mike Caldwell, a 35-year-old software engineer, holds a 25 Bitcoin token at his shop in Sandy, Utah. Caldwell mints physical versions of bitcoins, cranking out homemade tokens with codes protected by tamper-proof holographic seals, a retro-futuristic kind of prepaid cash. With up to 70,000 transactions each day over the past month, bitcoins have been propelled from the world of Internet oddities to the cusp of mainstream use, a remarkable breakthrough for a currency
/ AP

Marney Cox, San Diego Association of Governments

Bitcoin is a new Internet-based, completely digital currency that facilities transactions between people without a middleman. So it substantially reduces transaction costs, making it valuable to everyone including merchants. Bitcoin allows ordinary people to store, transfer and exchange money (bitcoin) without banks or credit card companies, and is faster, cheaper, more accurate, more flexible, and more secure (in some ways) than traditional forms of currency. Bitcoin will not replace money, but it will build on the success of the Internet’s virtual shopping/trading network -- in other words, a potential game changer in an increasingly global marketplace.

Yes
62% (46)

No
38% (28)

Phil Blair, Manpower

Who reading this would take their next paychecks in bitcoins? A hypothetical version of money that has no backing by any government, gold or value at all. What Bitcoin will do is motivate the banking industry, working within governmental controls to perfect and automate the transfer of money via some version of smart phones. I do see the day coming very soon when we will not carry money in our pockets but transfer payments of all kinds via electronics. But it will be real money not fake, made up money that is backed by only promises.

Kelly Cunningham, National University System

As fiat monetary systems (especially including the U.S. dollar) continue to debase national currencies, alternative forms of money become more appealing as standards of exchange. This is particularly significant as the U.S. dollar loses its monopoly power as the world’s reserve currency. Virtual currencies may legitimately serve as "legal means of exchange" with significant advantages as payment networks having vast utility for their currency units. However, a major drawback in Bitcoin currency is not having intrinsic value. Unless the alternative currency can be directly exchanged for gold, silver, oil, “Beanie Babies” or something, it is more speculative asset than currency.

Gina Champion-Cain, American International Investments

Alan Gin, University of San Diego

Because of concern for the stability of the currency in some countries, there will always be demand for alternative forms of money. For decades, the fallback has been the U.S. dollar. But due to improvements in technology, something like the Bitcoin is now an option. Right now, it is in its formative stages, and there is wild activity going on at times which makes it a dicey proposition. But stability will eventually come and it will become a more viable and accepted option.

Stephan Goss, Zeeto Media

Bitcoin is a very disruptive technology and whether or not Bitcoin itself survives, the concept behind it will thrive. Currencies haven’t had any major innovations since moving away from the gold standard. Bitcoin brings forth a powerful way to exchange value that doesn’t rely on governments or banks. I expect Bitcoin and the concept of decentralized currencies to evolve so rapidly that it will be measured in months instead of decades. Ten years from now Bitcoin may no longer be around, but a decentralized method of wealth transfer will be at least of equal size as most of today’s fiat currencies.

James Hamilton, University of California San Diego

Foreigners today are holding over half a trillion dollars in $100 bills, and a related desire to hold physical gold sent the yellow metal’s price soaring a decade ago. There is a tremendous demand internationally for an anonymous, extragovernmental web-based currency. Notwithstanding, the value of Bitcoin is looking very much like a bubble, and both the logistics of maintaining the network as well as its true anonymity remain in doubt. But even if Bitcoin crashes, I expect that a decade from now we will see significant amounts of wealth being held in the form of Bitcoin or something like it.

Jamie Moraga, intelliSolutions

Not in the foreseeable future, but digital currency will happen at some point in time. Bitcoins aren't real money. Money has to provide a yardstick against which the market value of everything else in the economy is expressed. It has to be a medium of exchange. And, it has to provide a way to hold wealth in a completely liquid form. Today, Bitcoins can't serve in the above fashion. They are too volatile; they aren't a stable unit of market value; and you can't replace an entire dollar base with them. The U.S. dollar requires trust, a trust in the US. However, with bitcoins, you don't know who you are trusting - it's an open source peer-to-peer network. Also, cybersecurity is a huge issue - how do you protect against theft and counterfeiting? All that being said, in the last 20 years technology has changed the world on many fronts, and similarly digital currency will occur at some point in the future, whether it's Bitcoin or something else.

Gary London, The London Group Realty Advisors

I suppose so, but it is off to a shaky start, what with the Winkelvoss twins as promoters, and a bunch of the money lost by an investor, presumably buried with its cryptographically secured harddrive in a New Jersey dump. This is an online currency whose transactions are now beyond government control, and difficult to track. The concern is the speculative bubble nature of this medium, coupled with the propensity to use bitcoins for illegal transactions. No bank robberies but a lot more cybercrime. It is unlikely that I will accept fees on consulting agreements based on being paid in bitcoins.

Jim Plante, Pathway Genomics

Even SnoopDogg seems to think so, based on his recent tweet, "My next record available in Bitcoin and delivered in a drone." The way we exchange money needs a major overhaul. The distribution of money is in the midst of reinvention, as with Square, Paypal, and others. While governments protecting their sovereignty will aggressively resist Bitcoin, citizens will increasingly adopt as it promises to support a meritocracy. Is Bitcoin the future money? The jury may be out, but one thing is certain -- decentralized digital currencies are here to stay.

Norm Miller, University of San Diego

Bitcoin grew rapidly to facilitate anonymous buying and selling of things like drugs, a market use the government is trying to stop. So the utility of Bitcoin is diminished if anonymity is eliminated. The Bitcoin value for buyers of the currency may be a little like betting on a Ponzi scheme. At the same time there will be alternative forms of transacting in dollars and euros and real money using smart phones and this may prove the demise of debit cards and cut into the credit card industry.

Rick Sanborn, Seacoast Commerce Bank

Although Bitcoin is an experimental digital currency (not currently an official currency), it is in its infancy. There is a growing belief that online payment systems, and online currency exchanges, both centralized and decentralized, have legitimate places in the global trade of business. Bitcoin’s challenge has been, and will continue to be, the perceived risk of use for illicit activity and lax security controls, which has led to pricing instability. As with most products and services that facilitate trade, controls and regulation get implemented to create stability and security, which will happen as Bitcoin becomes an official currency.

Lynn Reaser, Point Loma Nazarene University

Speculative investors, hoping to reap large gains, have driven up the price of bitcoins from $13 in January to more than $1200. While a Cypriot university is accepting bitcoins for tuition and Virgin Galactic is taking them for space travel, the currency is probably much too volatile to gain widespread acceptance for payments. Most companies are quickly converting them into dollars. Bitcoin’s risk of accommodating money laundering or of a precipitous drop with a bursting of a speculative bubble could well doom its existence. A currency’s worth in only as good as confidence in its value, and Bitcoin confidence could be short-lived.

John Sarkisian, Pro Performance Sports

There are many alternative forms of payments or bartering that survive over time. The question is how large will Bitcoin grow and into what areas of commerce. From what I have read it works well for the illegal drug trade. It is also appears to be of great interest to speculative investors/gamblers who want to profit from its volatility. Given the fact that most people I speak to don’t understand how it works and have no interest in Bitcoin, I believe it will sustain for only niche markets.

Dan Seiver, Reilly Financial Advisors

There is technological room for a virtual currency. Bitcoin, however, already has lots of competition: altcoins.com lists 30 other cryptocurrencies. Bitcoin itself may not survive in the long run, since one desirable feature of any currency is some stability of purchasing power, and Bitcoin's value has fluctuated dramatically. I have also not seen proof that the supply of Bitcoin is truly limited, since the creation process is obscure, and the creator is essentially an unknown individual. Of even greater concern is that the runup in the price of Bitcoin to $1,000 looks like a classic bubble to me, and these always end badly.

Chris Van Gorder, Scripps Health

While Bitcoin and the whole concept of “virtual money” is intriguing, I think it will only gain widespread acceptance if it can be traded over some type of electronic exchange that is overseen by a credible institution. An exchange would help to maintain a stable valuation of the currency and a liquid market -- two things lacking with Bitcoin. I also suspect we will see more government intervention to deter illegal activity associated with virtual money. We saw this with the shutdown of Silk Road. While bitcoins were used there for purchasing illegal goods and services, the government may also be concerned with Bitcoin’s potential use for tax evasion purposes.